The week ahead

September returns with a bang next week, after the somewhat soporific trading and news-flow that has prevailed for most of August.

The major event comes on Friday, when the latest set of non-farm payrolls emerge. The current expectation is for an increase in employment of 173,000, up from the 162,000 seen in July, while the unemployment rate will likely remain unchanged at 7.4%. With expectations now being that the US Federal Reserve will begin tapering QE3 in September, a strong reading could well see an adverse market reaction. Don’t forget that Monday is Labor [sic] Day in the US, which means that the ADP employment report will be published on Thursday, rather than the usual Wednesday. This is forecast to show private payroll growth of 180,000 in August, down from 200,000 in September.

In addition, the Fed will publish its Beige Book, the informal survey of purchasing managers that helps it to gauge the current health of the US economy. As with all US data at present, it needs to be fed into the matrix that helps us and the Fed to determine whether tapering is appropriate. The tone of trading in August has been that the taper will start in September, even if at a slow pace.

It is also an important week for China data, as the monthly manufacturing and non-manufacturing numbers come round. The official number for August is forecast to remain steady at 50.3, showing a modicum of growth, but the HSBC estimate will strike a more positive tone, moving firmly from contraction (i.e. below 50) to expansion, as it rises from 47.7 to 50.2.

Traders should also watch out for GDP figures from the eurozone, Switzerland and Australia, while in the UK the National Institute of Economic and Social Research will issue its own estimate for UK GDP during the month of August.

The crisis in Syria will continue, with some suggesting we could see action by the major powers by the middle of next week. Although the UK is out of the frame, the US and France remain on course to take some kind of action. What we don’t know is how intensive it will be and how long it will last. Oil and gold have had a good week, and a renewed heightening of tensions could see more buying of these assets.

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